Divisions threaten Obama’s stimulus plan

Lawmakers are under orders to finish action on President-elect Barack Obama’s nearly $800 billion economic recovery plan by mid-February. But already it is plain that a set of serious fissures need to be bridged if the bill is to be completed within five weeks.

Obama urged Congress on Thursday to "act boldly and act now" to fix an economy growing perilously weaker, even as top Democrats said they dislike key provisions, especially the design of his tax cuts.

Democrats such as Budget Committee Chairman Kent Conrad complained openly that many of the incoming administration’s proposed tax cuts wouldn’t work. Republicans warned against excessive new spending, with both parties signaling the incoming president they intend to place their own stamp on the economic recovery effort.

Conrad, D-N.D., and Sen. Judd Gregg, R-N.H., also staked a firm position against using the economic recovery plan for permanent spending increases, opening a split with House Democrats hoping to use the plan to broaden eligibility for unemployment insurance and boost education spending.

"Doing things that would have a permanent effect when we face trillion-dollar deficits as far as the eye can see is just unwise," Conrad said.

A call for a $3,000 tax break for job creation drew particular criticism in a closed-door meeting, and numerous lawmakers said Obama had not ticketed enough of his tax proposal for energy.

But there was little or no dispute about the need for action, and Obama’s remarks coincided with a pair of government reports showing fresh weakness in an economy already in recession. An updated reading on unemployment was expected to bring even more bad news on Friday.

"If nothing is done, this recession could linger for years," with unemployment reaching double digits, Obama said in a speech at George Mason University in Fairfax, Va. "A bad situation could become dramatically worse."

Obama’s aides and congressional Democrats have been at work for weeks on legislation to create new jobs, help the unemployed, cut taxes and aid cash-strapped states. There also are subsidies to help the newly unemployed afford their health care, a big new effort to improve the energy efficiency of federal buildings, and tax credits for business investment in plants and equipment.

The details are closely held and subject to change — and the cost of various components seems to be bouncing around daily in the push and pull between the Obama transition team and congressional leaders.

"We are not going home without an economic recovery package," she told reporters, and Senate Republican leader Mitch McConnell of Kentucky, at a different appearance, agreed that that allowed enough time to get the job done.

About $300 billion of Obama’s package would be for tax cuts or refunds for individuals and businesses.

One tax provision would provide a $500 tax cut for most workers and $1,000 for couples, at a cost of about $140 billion to $150 billion over two years. The individual tax cuts may be awarded through withholding less from worker paychecks, effectively making checks about $10 to $20 larger each week.

Democrats emerging from a closed-door meeting of the Senate Finance Committee had little positive to say about the tax cut proposals. Conrad was critical of the proposed break for workers and their families.

"Twenty bucks a week. How much of a lift is that going to give?" he said.

Nor did he sound positive about a proposed tax break for businesses to create jobs — a $3,000 tax credit for companies that hire or retrain workers.

"If I’m a business person, it’s unlikely if you give me a several thousand dollar credit that I’m going to hire people if I can’t sell the products they’re producing," Conrad said.

Republicans noted forecasts of a record $1.2 trillion deficit for the current year and said too much additional spending could be harmful. "We can’t buy prosperity with more and more government spending," declared Rep. John Boehner of Ohio, the House Republican leader.